Key Predictions for the Future of Fintech
Posted on the 10th August 2023 by Hamish Anderson in SME blog, Founders' blog, Founder Insights
If the last 10 years have seen remarkable transformations in the way that we all transact, invest, and manage our finances, what will the next ten bring?
“Everyone’s always asking me when Apple will come out with a cell phone. My answer is, ‘Probably never.’” Wrote David Pogue, the then technology correspondent, in the New York Times in 2006, beautifully demonstrating the folly of making public your predictions.
The swiftly shifting course of fintech advancement is particularly difficult to map, given the burgeoning levels of investment and disruptive aims of many of the companies involved.
Whilst I don’t profess to have a crystal ball, 10 years of running a successful fintech does afford me some degree of insight. So, at the risk of future reckoning, here are my predictions for the future of fintech, highlighting transformative potential and the opportunities that lie ahead.
Artificial intelligence (AI) and machine learning (ML) have already made a significant contribution to the fintech sector. Neither are new, as ML has been integrated within transaction monitoring and fraud detection for several years. Their impact and adoption will continue to grow exponentially in the next decade. AI-powered chatbots and virtual assistants will become increasingly sophisticated, offering personalized financial advice, automating customer service, and streamlining processes. ML algorithms will take an even more significant role in enhancing risk assessment models, fraud detection, and credit scoring, enabling more accurate and efficient decision-making. The power of AI and ML will assist human technologists, financiers and entrepreneurs to fuel innovation, enhance customer experience, and drive operational efficiency in the ecosystem.
After a slow start, open banking has already begun to reshape the financial landscape. I believe its full potential will unfold in the next decade. Open banking frameworks, driven by the use of APIs (technical integrations and linkages between different software and service), will facilitate secure data sharing between financial institutions and service providers. This will improve the speed, accuracy and ease-of-use of a myriad of innovative products and services, such as personalized financial management tools, customized lending solutions, and cross-border payments. If there’s a downside to open banking, it is that it may come at the cost of a degree of privacy. For example, loan decisions in future may require that you provide access to your bank account and transaction history to lenders in order that they can opine on affordability. While this will certainly reduce lender risk and accelerate the process, I’m sure I’m not the only person who will grant access to my financial affairs with reluctance.
Decentralized Finance, or DeFi, has gained significant attention in recent years, and its impact will continue to expand in the next decade. Built on blockchain technology, DeFi aims to revolutionize traditional financial systems by providing decentralized, transparent, and accessible financial services. Smart contracts will enable programmable money, automated lending and borrowing platforms, and decentralized exchanges. DeFi has the potential to disrupt traditional banking models, democratize access to financial services, and provide inclusive solutions for the unbanked and underbanked populations.
The Internet of Things (IoT) will increasingly intersect with fintech, creating a connected ecosystem of devices, sensors, and data. IoT-enabled devices, such as wearables and smart home devices, will seamlessly integrate with fintech platforms, enabling frictionless payments, personalized financial insights, and enhanced security. For example, connected cars may facilitate in-car payments for fuel or tolls, while smart homes can automate utility bill payments. The integration of IoT and fintech will enhance convenience, improve data-driven decision-making, and unlock new opportunities for personalized financial experiences.
Cryptocurrencies have already disrupted the financial sector, and their influence will only grow stronger in the next decade. The adoption of cryptocurrencies, such as Bitcoin and Ethereum, will become more widespread, with increased acceptance from mainstream financial institutions and governments. Additionally,it’s likely that we will see further expansion of Central Bank Digital Currencies (CBDCs).
As fintech continues to evolve, ensuring robust security and privacy measures will be paramount. Cybersecurity threats will become more sophisticated, requiring constant innovation and proactive defense mechanisms. Biometric authentication, multi-factor authentication, and advanced encryption technologies will play a crucial role in safeguarding financial transactions and protecting sensitive user data. Privacy regulations, such as the General Data Protection Regulation (GDPR), will shape data governance practices, ensuring greater transparency and control for consumers.
How do you predict the sector will change in another ten years?